Fed Rate Cuts – All About Jobs

The Federal Open Market Committee voted to lower rates by 25 bps at the September meeting, citing “that downside risks to employment have risen.” I reported in December 2024 that the computer had forecast a decline in employment during the incoming Trump Administration.

Based on the most recent data, the unemployment rate stands at 4.1%, while the measure of discouraged and underemployed workers remains steady at 7.7%. Per usual, the Bureau of Labor Statistics revised its calculations for previous months. August’s growth whittled down to 78,000, and September’s calculation came in at 223,000, marking a total decline of 112,000 reported jobs in those two months.

Unemployment began to rise during the Biden Administration. In fact, not a single job in the private sector was created during the Biden Administration. People blame Trump’s deportation and DOGE efforts for a declining workforce, but that is certainly not the problem. Data indicates that citizens are beginning to rapidly fill roles once taken by migrants. Tariffs are not the problem either, as companies are not hiring for the short term.

Workforce softness often leads to lower rates as the Fed mistakenly believes that cheaper borrowing costs will ignite business investment, consumer spending, and strengthen businesses to the point that they need additional employees. Borrowing costs are not the reason why companies are not hiring. CONFIDENCE is the problem, as businesses do not foresee expansion in the near-term, as consumers are grappling with massive debt and an increased cost of living.

The number of unemployed Americans now outnumbers available job openings. Data from July show 7.24 million unemployed Americans compared to 7.18 million job openings, marking the first time that the unemployed have outnumbered the number of available jobs since April 2021. Companies are outsourcing work to places like India or places where humans work with automated AI. Rising wages and regulations, topped with inflation and ever-rising taxes, have created an unfavorable business environment.

Companies are not looking to expand when they are working to stay afloat. Businesses are not eager to take on additional debt, albeit at a lower rate, if they do not see a decent ROI in the future.

We have a Directional Change in 2026, which is an important near-term turning point. Look forward, and we see 2032 as a Panic Cycle with Directional Changes. The 2029/2030 period looks to be dominated by turmoil. Based on the model, unemployment will spike in the next year to nearly 7%. We are nowhere near Great Depression levels, but there will be a notable uptick in unemployment, coinciding with Panic Cycles globally in nearly every market.